econ chap 3

If a nation has an absolute advantage in the production of a good, ________.

• a. it can produce that good at a lower opportunity cost than its trading partner

• b. it can produce that good using fewer resources than its trading partner

• 
  c. it can benefit by restricting imports of that good

• 
  d. it will specialize in the production of that good and export it

If a nation has a comparative advantage in the production of a good, ________.

• a. it can produce that good at a lower opportunity cost than its trading partner

• 
  b. it can produce that good using fewer resources than its trading partner

  
  

• 
  c. it can benefit by restricting imports of that good

• 
  d. it must be the only country with the ability to produce that good

Which of the following statements about trade is true?

• a. People that are skilled at all activities cannot benefit from trade.

• b. Unrestricted international trade benefits every person in a country equally.

• c. Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage.

• d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

According to the principle of comparative advantage, ________.

• a. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners

• b. countries should specialize in the production of goods that they enjoy consuming

• c. countries with a comparative advantage in the production of every good need not specialize

• d. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners

Which of the following statements is true?

• 
  a. Self-sufficiency is the road to prosperity for most countries.

• b. A self-sufficient country at best can consume on its production possibilities frontier.

• c. A self-sufficient country consumes outside its production possibilities frontier.

• d. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient.

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________.

• 
  a. the domestic price of 1 pencil is 3 pens

• b. the domestic price of 1 pencil is 1/4 of a pen

• c. the domestic price of 1 pencil is 1/3 of a pen

• d. the domestic price of 1 pencil is 12 pens

• e. the domestic price of 1 pencil is 4 pens

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________.

• a. the opportunity cost of 1 pen is 1/4 of a pencil

• b. the opportunity cost of 1 pen is 12 pencils

• c. the opportunity cost of 1 pen is 1/3 of a pencil

• d. the opportunity cost of 1 pen is 3 pencils

• e. the opportunity cost of 1 pen is 4 pencils

Which of the following statements about absolute advantage is true?

• a. Germany has an absolute advantage in the production of wheat while Poland has an absolute advantage in the production of computers.

• 
  b. Germany has an absolute advantage in the production of both wheat and computers.

  
  

• c. Poland has an absolute advantage in the production of both wheat and computers.

• d. Poland has an absolute advantage in the production of wheat while Germany has an absolute advantage in the production of computers.

The opportunity cost of 1 unit of computers in Germany is ________.

• a. 1/5 of a unit of wheat

• b. 1/4 of a unit of wheat

• c. 4 units of wheat

• d. 5 units of wheat

The opportunity cost of 1 unit of computers in Poland is ________.

• a. 4 units of wheat

• b. 1/4 of a unit of wheat

• c. 2 units of wheat

• d. 1/2 of a unit of wheat